North Korea launched a missile over Japan, Congress looks towards the debt ceiling, the ECB President sent the euro soaring, the world is growing in unison for the first time in 10-years, U.S. home sales disappointed, and thought leaders focused on why the debt ceiling matters and whether or not there is a bubble in the bond market.Read More
Explore Waterloo’s views on where the markets and economy are headed this year.Read More
Tom Fairless – The Wall Street JournalECB Extends but Scales Back Stimulus, Whipsawing MarketsSummary:The European Central Bank (ECB) announced a continuation of its quantitative easing program but will begin reducing purchases in April 2017. The current program was scheduled to end in March 2017 but will now extend until at least December of next year. ECB President Mario Draghi said that stimulus is still needed to help get the eurozone economy back on track. European stocks reacted positively to the announcement given that central bank purchases help keep rates low which is a tailwind for risk assets.Read More
Catch up on the news and insights moving the markets with our weekly market commentary.Read More
The Associated Press – The New York TimesFed Minutes Raise Expectations for December HikeSummary:Federal Reserve’s November meeting minutes show that Fed officials were moving closer to raising interest rates. Some officials argue that if the Fed does not hike rates in December, it will damage the central bank’s credibility given the many hints it has sent regarding an upcoming hike. Most analysts and economists feel confident that a rate hike is coming in December, but the open question now is how many further hikes will occur in 2017. If President-elect Donald Trump succeeds in reducing taxes and increasing spending on infrastructure, some believe the estimated two rate hikes next year could turn into three. The Fed did not discuss the election at the November meeting, but Janet Yellen announced last week that the election has not changed the Fed’s plans regarding the next rate hike.Read More
Ben Protess and Alexandra Stevenson – New York TimesMary Jo White to Step Down as S.E.C. ChiefSummary:
Mary Jo White, the chairwoman of the Securities Exchange Commission (SEC), announced her plans to leave the agency. White is the first Obama administration appointee to step down following the election results. Mr. Trump has made it clear that he intends to dismantle Dodd-Frank, the financial regulatory reform put in place during the 2008 financial crisis. This is first of the many regulations that Mrs. White oversaw that Trump will likely repeal. The SEC is unlikely to pursue many of the initiatives that White had on the agenda and could reduce the effects of some of the financial regulations put in place following the financial crisis.
Karen Tumulty, Philip Rucker and Anne Gearan – The Washington PostDonald Trump Wins the Presidency in Stunning Upset Over ClintonSummary:
Donald Trump was elected the nation’s 45th president in a surprise victory over Hillary Clinton. Support for Trump affirmed the repudiation of the status quo and the eagerness for major changes on Capitol Hill. The markets were initially rattled by the polls but recovered prior to Wednesday’s open and ended the day in the green. President-elect Trump will take the next few months to build out his Cabinet and focus on policy proposals. He will take the oath of office on January 20th.
When it became clear that Trump would indeed win the presidency Tuesday night, financial markets responded violently as Dow Jones Industrial Average futures fell 800 points. Thursday the Dow closed at a record high, marking one of the biggest market turnarounds since the global financial crisis. A new regime requires a new outlook and given…Read More
Jethro Mullen – CNN Money Stocks Jump After FBI Clears Clinton AgainSummary:
Global markets reacted positively after FBI Director James Comey said that the agency will not pursue criminal charges against Hillary Clinton in the wake of finding new emails related to the investigation into Clinton’s personal server. Bouts of uncertainty regarding the election resulted in the longest losing streak for the S&P 500 since 1980, but Comey’s new comments have investors pricing in a Clinton victory and bullish outlook for the markets.Read More
Kate Davidson & Jon Hilsenrath – The Wall street Journal
Fed to Markets: June Rate Increase Is on the Table
The Fed’s meeting minutes showed that an interest rate increase is still in play for June’s policy meeting. The news rattled investors who, until recently, saw almost no possibility that the Fed would make a move at the June meeting. Most Fed participants judged that if economic growth is improving and inflation it nearing the 2% then it would be appropriate to raise rates. The fact that the Fed is considering a rate hike has mixed implications for investors. If the Fed raises rates then it signals that they feel the economy is improving, on the other hand, an increase in interest rates puts downward pressure on stocks. The idea that rates could be raised in June was not unanimous with things like soft consumer spending and a decline in business activity on the dovish officials’ radar.
Jeff Cox – CNBC
Nonfarm Payrolls: 160K Jobs Added, vs Expected 202K
The US economy added fewer jobs than expected in April, but the unemployment rate held steady at 5%. The disappointing numbers pushed back rate hike expectations in the fed futures markets with prices showing only a 50% chance that the Fed raises rates again this year. The bright spot of the report was wage growth which showed that wages grew at a 2.5% annualized rate. Job growth was concentrated in the services sector while the manufacturing sector continued to struggle. Indicators show little signs of employment gaining momentum unless GDP grows more than expected.
Lindsay Dunsmuir and Jason Lange – Reuters
Fed Signals No Rush to Hike Rates as Economy Hits Soft Patch
As expected, the Federal Reserve left interest rates unchanged but kept the door open for a rate hike at their next policy meeting in June. The most recent statement largely mirrored the release from the March meeting showing that Fed officials see strength in the labor market but are concerned that economic growth may be slowing. The Fed has moved away from citing specific risks and issuing forward guidance while maintaining a ‘wait-and-see’ approach to raising rates.